Who are Incoterms®?
Incoterms®, short for International Commercial Terms, are a series of commercial terms defined by the ICC (the International Chamber of Commerce) and used in imports and exports around the world: they define the rights and duties of all the legal entities involved in the transfer of goods.
Difference between Incoterms® 2020 and 2010
The main chancges made by International Chamber of Commerc to the Incoterms® 2010 rules in the Incoterms® 2020 rules are:
- Bills of lading with an on-board notation and the FCA Incoterms® rule. Now there is an additional option: the buyer and the saller can agree that the buyer will instruct its carrier to issue an on-board bill of lading to the seller after the loading of the goods, the seller then being obliged to tender that bill of lading to the buyer, typically through the banks.
- Costs, where they are listed. In the Incoterms 2020 rules, the equivalent of A6/B6, namely A9/B9, now lists all the cost allocated by each particular Incoterms® rule.
- Different levels of insurance cover in CIF and CIP. In the Incoterms® 2010 rules, A3 of both CIF and CIP imposed on the seller the obligation to “obtain at its own expense cargo insurance complying at least with the minimum cover as provided by Clauses (C) of the Institute Cargo Clauses or any similar clauses.
- Arranging for carriage with seller’s or buyer’s own means of transport in FCA, DAP, DPU and DDP. In the Incoterms® 2010 rules, it was assumed throughout that where the goods were to be carried from the seller to the buyer, they would be carried by a third-party carrier engaged for the purpose either by the seller or the buyer, depending on which Incoterms® rule was used. However, there were some situations where they could be so carried without any third-party carrier being engaged at all. The Incoterms 2020 take account of these eventualities, by expressly allowing not only for the making of a contract of carriage, but also for simply arranging for the necessary carriage.
- Change in the three-letter initials for DAT to DPU. The order in which the two Incoterms 2020 rules are presented has been inverted, and DAP, where delivery happens before unloading, now appears before DAT. Secondly, the name of the rule DAT has been changed to DPU (Delivered at Place Unloaded), emphasising the reality that the place of destination could be any place and not only a “terminal”.
- Inclusion of security-related requirements within carriage obligations and costs: An express allocation of security-related obligations has now been added to A4 and A7 of each Incoterms rule. The costs incurred by these requirements are also now given a more prominent position in the costs article, namely A9/B9.